(Bloomberg) — German government bonds fell, while stocks posted small moves, after euro-area inflation accelerated more than anticipated, potentially blunting the scope for interest rate cuts.
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Investor attention now turns to the Federal Reserve’s preferred price-growth measure due later Friday.
Ten-year bund yields advanced five basis points after the European data showed consumer prices rose 2.6% from a year ago in May. Traders maintained wagers for a cut at the European Central Bank meeting next week, but reduced bets on easing after that. The Stoxx 600 was little changed and contracts for US equities edged lower.
ECB officials have warned of an uneven path as inflation retreats. The core PCE deflator, meanwhile, which the Fed favors for measuring inflation, likely moderated in April to the slowest monthly pace yet this year.
Stock gains this month were fueled by the rally in tech as well as Fed Chair Jerome Powell’s dovish posture on rates at the start of May. That optimism has faded over the course of the month, and Friday’s data could revive hopes for easing if there are signs inflation is returning to target.
Global Bond Markets Wobble Once Again as Rate-Cut Hopes Deflate
In emerging markets, South Africa’s rand led declines after falling more than 3% over three days. Investors are awaiting the final results of the nation’s elections amid concern over the different permutations a coalition may take, and whether a market-friendly government will emerge.
Hope and Angst Grip South African Markets as Coalition Era Dawns
Trump Convicted
Elsewhere, a jury found Donald Trump guilty on all 34 counts of falsifying business records at his hush-money trial, making him the first former US president to be convicted of crimes. With Trump to due to face sentencing on July 11, the conviction creates a daunting legal and political path as he faces President Joe Biden in November as the presumptive Republican nominee.
Trump Media & Technology Group traded down 12% in extended trading Thursday.
“Expectations for a guilty verdict were somewhat priced into markets,” Paresh Upadhyaya, director of fixed income and currency strategy at Amundi Asset Management in Boston. “The bigger impact to markets could be if this guilty verdict begins to turn the momentum away from Trump to Biden.”
Key events this week:
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Eurozone CPI, Friday
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US consumer income, spending, PCE deflator, Friday
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Fed’s Raphael Bostic speaks, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 was little changed as of 10:26 a.m. London time
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S&P 500 futures fell 0.2%
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Nasdaq 100 futures fell 0.4%
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Futures on the Dow Jones Industrial Average were little changed
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The MSCI Asia Pacific Index was little changed
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The MSCI Emerging Markets Index fell 0.7%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0842
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The Japanese yen fell 0.3% to 157.27 per dollar
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The offshore yuan fell 0.1% to 7.2619 per dollar
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The British pound fell 0.1% to $1.2713
Cryptocurrencies
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Bitcoin fell 0.8% to $67,905.98
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Ether fell 0.2% to $3,731.82
Bonds
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The yield on 10-year Treasuries advanced one basis point to 4.56%
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Germany’s 10-year yield advanced four basis points to 2.70%
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Britain’s 10-year yield advanced three basis points to 4.37%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess, Carter Johnson and Chiranjivi Chakraborty.
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